How have the pandemic and online spending affected Black Friday shopping? Analyzing retail trade margins 2009–22
Black Friday and the subsequent weekend are among the biggest shopping events in American retail. The holiday season accounts for around 19 percent of retailers’ annual revenue and serves as a general barometer of consumer confidence in the economy.1 The Black Fridays of old, however, have undergone a major transformation. Single-day deals and lines stretching around the block are becoming a thing of the past. Black Friday has grown to a weekend-long occasion culminating in Cyber Monday—an online-focused shopping event. And since the onset of the COVID-19 pandemic, retailers have altered the duration and timing of their holiday sales. This Beyond the Numbers article will explore how Black Friday has changed over the years by using Consumer Price Index (CPI) and Producer Price Index (PPI) commodity indexes to analyze prices. We’ll look at how the COVID-19 pandemic has impacted Black Friday, and how the continuing growth of online shopping has affected the holiday shopping season.
History of Black Friday
Traditionally, in the United States, the Macy’s Thanksgiving Day Parade, inaugurated in 1924, kicked off the holiday shopping season.2 Historically, retailers agreed to not advertise Christmas sales until Thanksgiving Day was over. In 1939, President Franklin D. Roosevelt moved Thanksgiving Day from the last Thursday to the fourth Thursday of November to extend the holiday shopping season.3 The origin of the term “Black Friday” describing the shopping day after Thanksgiving Day is unclear, but this name likely reflected the day’s unique standing as the official start of what retailers hoped would be a busy shopping season. Regardless, data from the U.S. Bureau of Labor Statistics (BLS), and other sources, can be used to explore the effects of Black Friday on retailers and consumers.
Measuring Black Friday by looking at margins
BLS publishes multiple CPIs and PPIs covering the sale of consumer goods. The CPI program measures changes in the prices urban consumers pay for goods, while the PPI program calculates retail trade indexes that measure changes in gross margins, the differences between selling prices retailers pay for goods and purchase prices they pay to acquire goods.
Retail trade PPIs measure the changes in revenue for the services retailers provide while facilitating the sale of goods—services such as marketing, storing, and displaying goods in convenient locations and making the goods easily available for customers to purchase—not changes in the selling prices of goods. Margins can vary widely by industry. For example, retailers selling homogenous, commodity-type goods, such as groceries, tend to have lower margins than retailers selling specialized or customized goods, such as tailored suits. Furthermore, PPI commodity indexes track the average changes in prices for specific products or groups of products, irrespective of industry of origin. For example, the PPI commodity index for alcohol retailing tracks changes in gross margins for wine and other alcoholic beverages regardless of whether these goods are sold by a grocery store, a liquor store, or a convenience store.
The analysis that follows covers the period from 2009 to 2022. To examine the effects of Black Friday on retailers, this article will analyze three PPI commodity margin indexes for consumer goods retailing that are typically popular around the holidays, as shown in figure 1. Unless otherwise stated, all data are not seasonally adjusted.
According to PPI margin indexes, when does the holiday shopping season start?
Historically, margins have generally increased throughout the summer as retailers either raised prices or reduced discounts. Margins would peak and begin to transition in November in anticipation of holiday price cuts that happened after Thanksgiving Day and in December. By Black Friday, inventory acquisition prices were set, resulting in decreases in margins and declines in the PPI retail trade indexes. CPI data on retail prices also provide evidence of the discounts offered to consumers.4 After the holiday shopping season concluded, retail prices, and consequently margins, tended to rebound in the new year.
Shifting November margin trends
From 2009 through 2022, trends for PPI margins have changed over the holiday shopping season. From 2009 through roughly 2015, retailers of televisions and computing products tended to delay price rollbacks until after Thanksgiving Day, while apparel retailers typically began discounting prices earlier in November. In contrast, since 2016 margins for all three of these product categories have mostly declined in November. Table 1 indicates whether margins for televisions, apparel, and computers increased or decreased in November and December for 2009 through 2022.
Television margins and the Black Friday doorbuster strategy
From 2009 to 2015, margins for televisions were mixed in November, but decreased in December. By 2016, marketing patterns had reversed. From 2016 to 2022, margins decreased substantially in November and generally increased in December. Holiday-related discounting for televisions and related equipment had shifted back to early November (See table 1.)
For Black Friday and during the holiday shopping season, televisions are widely advertised and promoted with steep discounts. In the month of November, consumer prices for televisions declined an average of 2.3 percent from 2009 to 2022, and an average of 3.1 percent from 2016 to 2022.5 This “doorbuster” strategy is intended to draw in shoppers, hoping that they will make additional purchases of less discounted goods, extended warranties, or other add-ons that have higher profit margins. Over the entire 2009 to 2022 period, margins for televisions decreased an average of 8.0 percent in November. From 2016 to 2021, the average November decline in margins was an even larger 16.2 percent.6 With such steep discounts and declines in gross margins in November, it is not surprising that they were short-lived; in comparison, the December margins only decreased twice from 2016 to 2022.
Margin declines accelerate for apparel during Black Friday shopping season
Since the start of PPI margin index coverage of trade commodities in 2009, margins for apparel have declined nearly every November. Margins decreased in November by an average of 3.6 percent over this period, while retail prices declined by an average of 1.9 percent.7 In addition, declines in margins and consumer prices have grown larger from 2009 to 2022. In contrast to televisions, apparel margins typically continued to fall in December. Some of this discounting is intended to entice shoppers, but discounting also serves to remove excess apparel inventory in anticipation of updates to apparel lines for the upcoming season and year.
These continued declines in December occur because apparel styles and trends are always in flux, as clothing appearance and function shift season-to-season and year-to-year.8 New merchandise lines generally are introduced early in the calendar year, requiring retailers to clear holiday season inventory ahead of the new year. Apparel margins typically rise in February and March, and also increase in early fall, before the cycle of holiday discounting begins again.
Computer margins hold steady in December
From 2009 through 2013, computer retailers consistently increased margins in November to increase profits entering the holiday season, while adjusting margins in December depending on variations in sales and inventory. Beginning in 2014, computer retailers began offering deep discounts beginning in November, resulting in lower margins. In addition, by 2018 computer retailers were consistently reducing discounts and increasing margins in December as the holiday shopping season approached its conclusion.9
Impact of the COVID-19 pandemic on Black Friday sales and the growth of online shopping
The Covid-19 pandemic resulted in huge growth in online shopping. Following the start of the COVID-19 pandemic, retailers scrambled to enhance their online retail presence. In the second quarter of 2020, online sales revenue grew 32 percent from the prior quarter—the largest quarterly increase on record. Online revenue as a share of total retail revenue grew from 11.9 percent to 16.4 percent. (See chart 1.) Despite increases in online sales, total retail sales fell 4.2 percent between the first and second quarters of 2020.10 The share of online sales as a percentage of total retail revenue has declined slightly since the second quarter of 2020; however, online sales remain well above pre-pandemic levels.